What Texas Form 05-359 Is For
When a company wants to withdraw its registration to conduct business in Texas or end its legal existence in the state, it must use Texas Form 05-359 to request a Certificate of Account Status from the Texas Comptroller of Public Accounts. This certificate attests to the entity's adherence to all tax regulations specified in the Texas Tax Code.
Before most taxable entities can finalize termination or withdrawal, they must file the Certificate of Account Status, a necessary tax clearance document, with the Secretary of State. Even if all other documentation is complete, the Secretary of State will reject termination filings if this certificate is missing.
When You’d Use Texas Form 05-359
Taxable entities use Texas Form 05-359 when they are winding up operations and preparing to end their legal relationship with the state. This applies to both Texas-formed entities and out-of-state entities registered to do business in Texas.
Typical situations where this form is required include the following:
- A corporation or Limited Liability Company is permanently closing operations in Texas
- Limited Partnerships or other taxable entities withdrawing from Texas registration
- Businesses completing mergers where the surviving entity differs from the original taxpayer
- Entities converting into nonprofit organizations or another non-taxable structure
The form should only be submitted after all required tax reports have been filed and all tax payment obligations have been satisfied.
Key Rules or Details for Texas Form 05-359
The entity's tax account must be completely compliant before Texas Form 05-359 can be approved. Before granting tax clearance, the Texas Comptroller examines franchise tax and associated filings.
Essential rules to understand include the following:
- All required Franchise Tax Report filings must be submitted, including any Long Form Report, EZ Computation Report, No Tax Due Report, or other applicable Texas Franchise Tax Report Forms.
- Any outstanding tax return balances, penalties, interest, or sales tax liabilities must be paid.
- The final Franchise Tax Report must cover activity through the entity’s termination or withdrawal date.
- The Certificate of Account Status expires on December 31 of the year it is issued.
Some entities must mail Form 05-359 to request the certificate; they cannot do so online. These consist of entities with active audits, forfeited taxable entities, combined group members, and those with unresolved tax reports from previous periods.
Step-by-Step (High Level)
The Comptroller of Public Accounts and the Secretary of State must work together to obtain a Certificate of Account Status.
Step 1: Complete All Tax Filings
The business must pay all outstanding sales tax and franchise tax debts and file all required tax returns, including the final Franchise Tax Report.
Step 2: Confirm Eligibility to File Online
Entities eligible for electronic filing may request the certificate through the Texas Comptroller Webfile system using the taxpayer number and franchise tax access code.
Step 3: Submit Texas Form 05-359
The request can be sent electronically or by mailing a completed paper form that includes the taxpayer's name, end date, and accounting period.
Step 4: Receive the Certificate of Account Status
Approved requests generate Form 05-305, which serves as the official tax clearance letter.
Step 5: File Termination with the Secretary of State
Together with the relevant termination form and the necessary filing fee, the Certificate of Account Status must be turned in.
Common Mistakes and How to Avoid Them
- Requesting the certificate before filing the final Franchise Tax Report: File the final report first, so the certificate request is not automatically denied.
- Submitting an expired certificate to the Secretary of State: Confirm the certificate is current at the time of submission to avoid rejection.
- Using account printouts instead of an official Tax Clearance Letter: Obtain the official clearance document because general account summaries do not satisfy termination requirements.
- Using incorrect accounting periods on the final report: Ensure the final reporting period is set correctly to prevent processing delays due to period mismatches.
- Assuming tax clearance completes termination without the Secretary of State filing: Submit the required termination filing with the Secretary of State after clearance is issued.
What Happens After You File
Following the submission of Form 05-359, the Texas Comptroller of Public Accounts examines the entity's tax history. If all conditions are satisfied, the Certificate of Account Status is promptly sent by mail for paper requests or online.
When the Secretary of State gets the certificate and approves it, the entity's legal existence in Texas officially comes to an end. Owners may still be responsible for debts that were made before the business closed, and closing the company does not remove tax liability for previous years.
Prior to seeking termination clearance, previously forfeited entities must apply for reinstatement using Form 05-391, also called the Application for Reinstatement.
FAQs
Who must file Texas Form 05-359?
While nonprofit organizations are typically exempt, the majority of taxable entities, such as corporations, limited liability companies, and limited partnerships, are required to file this form before termination or withdrawal.
Is there a late or amended version of Form 05-359?
There is no late or changed filing for the request itself; however, if mistakes are found on the tax reports, they must be corrected before tax clearance can be given.
What taxes are reviewed before approval?
The Comptroller reviews reports on sales tax, franchise tax, and other taxes that are significant, including E-Z computation methods, cost of goods sold, compensation deductions, and gross receipts computations.
How long is the Certificate of Account Status valid?
The certificate is valid only through December 31 of the year it is issued and must be filed before expiration.
Does Form 05-359 affect federal income tax obligations?
The form does not replace federal income tax filing requirements, and federal returns must still be filed separately.
What if the entity needs to resume business later?
If business activity resumes after forfeiture or termination, reinstatement requires compliance with Texas Tax Code Section 171.0003 and submission of appropriate reinstatement forms.
